What is MIP (Mortgage Insurance Premium)?
MIP (Mortgage Insurance Premium) consists of annual payments on HUD mortgages. MIP is first paid at closing, and typically costs 1% of the loan amount, though this varies. MIP for HUD multifamily loan programs must then be paid annually. Specific costs also vary by program.
MIP (Mortgage Insurance Premium) Definition
MIP (Mortgage Insurance Premium) consists of annual payments on HUD mortgages. MIP is first paid at closing, and typically costs 1% of the loan amount, though this varies. MIP for HUD multifamily loan programs must then be paid annually. Specific costs also vary by program.
For example, MIP requirements for the HUD 223(a)(7) loan include:
Market Rate Properties: 0.50% upfront, 0.50% annually
Affordable Properties: 0.35% upfront, 0.35% annually
Green MIP Properties: 0.25% upfront, 0.25%
annuallyMarket Rate Properties: 0.65% upfront, 0.65% annually
Affordable Properties: 0.45% upfront, 0.45% annually
Section 220 Properties: 0.70% upfront, 0.70% annually
Green MIP Properties: 0.25% upfront, 0.25%
annuallyWhat is MIP (Mortgage Insurance Premium)?
MIP (Mortgage Insurance Premium) is an annual payment on a HUD mortgage, paid at closing, for each year of construction, and annually. For HUD 223(f) loans, MIP is 25 basis points for properties using a Green MIP Reduction, 65 basis points for market rate properties, 45 basis points for Section 8 or new money LIHTC properties, and 70 basis points for Section 220 urban renewal projects that are not Section 8 or LIHTC. For HUD 232 loans, MIP is 1% of the loan amount (due at closing) and 0.65% annually (escrowed monthly).
How does MIP (Mortgage Insurance Premium) work?
MIP (Mortgage Insurance Premium) is an annual payment on a HUD mortgage, paid at closing, for each year of construction, and annually. The amount of MIP varies depending on the type of loan program and the property type. For example, MIP requirements for the HUD 223(a)(7) loan include:
Property Type Upfront MIP Annual MIP Market Rate 0.50% 0.50% Affordable 0.35% 0.35% Green MIP 0.25% 0.25% In contrast, MIP requirements for the HUD 221(d)(4) loan include:
Property Type Upfront MIP Annual MIP Market Rate 0.65% 0.65% Affordable 0.45% 0.45% Section 220 0.70% 0.70% Green MIP 0.25% 0.25% What are the benefits of MIP (Mortgage Insurance Premium)?
MIP (Mortgage Insurance Premium) is an important consideration when looking at HUD loans. It is a type of insurance that protects the lender from losses that occur when a borrower defaults. While upfront and annual MIPs are costs you must look at when exploring your loan options, there are ways to reduce them — and even without a reduction, HUD loans are still generally much less costly than other types of multifamily debt, even Fannie Mae and Freddie Mac loans.
The benefits of MIP include:
- Protection for the lender from losses that occur when a borrower defaults
- Reduced costs for HUD loans compared to other types of multifamily debt
- The ability to reduce MIPs through the Green MIP Reduction program
What are the drawbacks of MIP (Mortgage Insurance Premium)?
The main drawback of MIP (Mortgage Insurance Premium) is that it increases the cost of the loan. The MIP is an additional cost that is paid at closing and annually, which can add up over time. Additionally, the MIP rate is higher for market rate properties than for Section 8 or LIHTC properties, which can make it more expensive for borrowers.
Source: www.hud223f.loans/glossary/mip-mortgage-insurance-premium and www.hud232.loan/hud-232-glossary/mip-mortgage-insurance-premium
How much does MIP (Mortgage Insurance Premium) cost?
MIP (Mortgage Insurance Premium) costs vary depending on the loan program. For the HUD 223(a)(7) loan program, MIP costs are 0.50% upfront and 0.50% annually for market rate properties, 0.35% upfront and 0.35% annually for affordable properties, and 0.25% upfront and 0.25% annually for green MIP properties. For the HUD 221(d)(4) loan program, MIP costs are 0.65% upfront and 0.65% annually for market rate properties, 0.45% upfront and 0.45% annually for affordable properties, 0.70% upfront and 0.70% annually for Section 220 properties, and 0.25% upfront and 0.25% annually for green MIP properties. For the HUD 223(f) loan program, MIP costs are 25 basis points for properties using a Green MIP Reduction, 65 basis points for market rate properties, 45 basis points for Section 8 or new money LIHTC properties, and 70 basis points for Section 220 urban renewal projects that are not Section 8 or LIHTC.
Sources: What is MIP (Mortgage Insurance Premium)? and MIP (Mortgage Insurance Premium) and the HUD 223(f) Loan Program
What are the eligibility requirements for MIP (Mortgage Insurance Premium)?
MIP (Mortgage Insurance Premium) eligibility requirements vary by program. For the HUD 223(a)(7) loan, the requirements include:
- Market Rate Properties: 0.50% upfront, 0.50% annually
- Affordable Properties: 0.35% upfront, 0.35% annually
- Green MIP Properties: 0.25% upfront, 0.25% annually
For the HUD 221(d)(4) loan, the requirements include:
- Market Rate Properties: 0.65% upfront, 0.65% annually
- Affordable Properties: 0.45% upfront, 0.45% annually
- Section 220 Properties: 0.70% upfront, 0.70% annually
- Green MIP Properties: 0.25% upfront, 0.25% annually
For more information, please visit What is MIP (Mortgage Insurance Premium)? and Terms, Qualifications, and Guidelines.
In contrast, HUD 221(d)(4) MIP requirements include: